Changes to gift card expiry dates and fees

Information for businesses

The NSW Government is introducing a mandatory minimum expiry period of 3 years for gift cards and gift vouchers sold to a consumer in NSW, as well as a ban on post-purchase administration fees, starting 31 March 2018. The new requirements have been made by amendment to the Fair Trading Act 1987.

The changes aim to strike a fairer economic balance for consumers and businesses in the gift card market. The reforms give consumers access to the full value of their gift card over a reasonable period of time, while maintaining a workable business model for traders.

Ban on post-purchase fees

Once the gift card or voucher has been issued, there is a ban on charging any post-purchase fee associated with redeeming the card/voucher that would reduce its value.

Terms used for post-purchase fees that will be banned include: activation fees, account keeping fees, balance enquiry fees, telephone enquiry fees and fees applied when a card is inactive or not being used (sometimes called dormancy or inactivity fees).

There are fees that a business may charge as part of a sale that is a cost of processing a payment. These fees apply regardless of the method of payment, such as overseas transaction fees, booking fees or payment surcharge fees. These are not considered post-purchase fees and are not captured by the ban. Further information is in the Statement of Regulatory Intent (in PDF format size: 286kb).

Do the changes apply to small businesses?

Is there a transition period?

Yes, there will be a transition period from 31 March to 30 September 2018.

During this phase, businesses can run down their existing stock of pre-printed gift cards but must take steps to inform customers that a 3-year expiry and no post-purchase fees apply. It is up to each business as to how they communicate this with the customer, but it must be clear. Businesses might choose to:

physically amend cards at the point of sale to strike out any reference to an expiry period which is less than 3 years, and/or insert an expiry date which is no less than 3 years into the future from the date of purchase

update terms and conditions on the store’s website

put signage on stands where gift cards are located and/or at point of sale

provide the customer with printed information at the point of sale about the changes

add a note to any receipt issued when the gift card is purchased.

It would be prudent for new orders of pre-printed stock to carry terms consistent with the 31 March requirements.

For gift cards sold online (digital or e-gift cards/vouchers) during the transition period, businesses should ensure that the cards or vouchers carry an expiry period of at least 3 years.

Businesses should take steps to inform customers that a 3 year expiry and no post-purchase fees apply. This may include:

updating terms and conditions on the business’s website

updating terms and conditions available at check out

updating the accompanying material (e.g. email that is sent with the e-voucher) that is sent to the gift voucher purchaser and/or recipient.

Gift cards sold online

The reforms apply to gift cards sold to a consumer who is in NSW at the time of sale or sold to a consumer who provides a NSW address in connection with the sale.

Cards sold to consumers who provide any address at the point of sale that is outside NSW are not required to carry a 3-year expiry date.

Unless you are certain and can demonstrate that the customer resides outside NSW, it is safer to assume the customer is NSW-based and therefore the gift card they purchase from you is subject to these reforms.

Included cards

All gift cards or vouchers sold in store or online to a consumer who is in NSW at the time of sale or sold to a consumer who provides a NSW address in connection with the sale are covered, unless specifically excluded.

Excluded cards

Specific gift cards or vouchers are excluded from complying with the new laws and these are listed in the table below.

Excluded gift cards

A gift card or voucher that is given by a business for free to a consumer

A gift card or voucher exchanged for goods returned to the supplier of the goods

Prepaid cards for phone credit or internet access

ATM cards, debit cards, credit cards or charge cards

Gift cards supplied as part of a customer loyalty or employee rewards program

A gift card or voucher supplied as part of a temporary marketing promotion as a bonus to the purchase of a good or service

A gift card or voucher sold for a particular good or service that is below the market value of the good or service (a genuine discount)

A gift card or voucher sold or donated for use in a fundraising appeal, including to a charity or not for profit organisation

A reloadable card that uses EFTPOS, Visa or Mastercard or a similar electronic payment system

A gift card or voucher for a good or service available for a limited time where the card or voucher expires at the end of that period (for example, entry to a concert or museum exhibition, or a pair of shoes that is only available for a limited time)

Replacements for lost and stolen cards

If a business chooses to replace a lost or stolen card, the new law does not apply because the replacement transaction is not a sale of a new card. The terms and conditions remain the same as at the time the card was bought. For cards purchased after 31 March 2018, best practice would be for a business to issue a replacement card with the balance of the 3 year expiry period that was left on the lost or stolen card.

Activation dates

Sales to interstate visitors

If a visitor from another state or territory buys a gift card while they are in NSW and the gift card can be redeemed for goods or services in NSW, the reforms will apply to the card or voucher sold to them.

Honouring gift cards issued under the previous ownership

If the business you are now the owner of is a "going concern" (able to pay its debts when they are due, and continue to operate without any intention to liquidate or wind up operations for at least the next 12 months) then you are required to honour existing gift cards purchased when the business was under previous ownership. If you would like more information, visit the ACCC website.

Accounting for gift card liabilities

Generally speaking, a minimum 3-year expiry date on gift cards will mean that it may take longer to account for revenue from their sale. This is because gift card revenue is usually accounted for when a gift card is redeemed or expired. Similarly, the records of financial liabilities resulting from gift card sales may need to be maintained for a longer period of time.

However, there is currently no uniform accounting standard for gift cards, so the impact of gift card reforms on your businesses may vary depending on your accounting practices. In certain circumstances, businesses can account revenue from unredeemed gift cards earlier than the minimum 3-year expiry date. Contact your accountant or the Australian Taxation Office for advice.

Does the retailer or supplier need to comply?

The law applies to the sale of the gift card. Generally, it is the retailer of the gift cards that will need to comply with the reforms. The level of responsibility applicable to other players in the supply chain will depend on the circumstances. For example, if a third-party provider supplies a gift card that is not compliant to a retailer, both the supplier and the retailer could be investigated. Businesses should work together to make sure that compliant gift cards are offered for sale.